The North Little Rock School Board poked at scenarios Thursday for offsetting a mix-up at the Pulaski County tax assessor's office that resulted in the incorrect distribution of well over $1 million in property taxes to the district.
The money, collected since at least 2008 and distributed to the North Little Rock district, was revenue collected on some 400 parcels of property scattered throughout the Pulaski County Special School District and should have gone to that district.
The North Little Rock School District now faces having to reimburse the Pulaski County Special District for the erroneous distribution in the past years and the prospect of reduced revenue -- as much as $450,000 a year in a $100 million budget -- in coming years since the district will no longer be receiving the incorrect payments.
Pulaski County Assessor Janet Troutman Ward and Joe Thompson, chief administrator in the assessor's office, explained the error that occurred in the assessor's office to the North Little Rock board members Thursday.
Scott Beardsley, senior vice president of First Security Beardsley Public Finance and an outside financial adviser to the board, and Steve Jones, an attorney for the district, also addressed the board on the ramifications of the error and possible resolutions. They raised the possibility of asking both Pulaski County and the Arkansas Department of Education's Public School Academic Facilities and Transportation Division for money to offset the losses.
In addition to paying the Pulaski County Special District, the North Little Rock district is likely to have to pay about $133,000 to taxpayers in the improperly taxed areas because the North Little Rock district tax rate of 48.3 mills is higher than the Pulaski County Special district's 40.7 mill tax rate.
The North Little Rock School Board took no action Thursday but voiced concerns about the situation and urged district administrators to pursue discussions with Pulaski County government leaders, Pulaski County Special School District and the Arkansas Department of Education.
"We want to sit down at the table with everybody and come to an agreement that makes sense for everybody," Board President J.T. Zakrzewski said. "That is all we want to do. That is the only outcome we want to see happen,"
Superintendent Kelly Rodgers said the amounts that are at stake have not been finalized. Settling on the dollar amounts will be one of the purposes of the talks.
Board member Dorothy Williams asked during the meeting whether there would be some leeway built into the timing for any repayment the North Little Rock district must make.
"We don't want to go into fiscal distress," Williams said, referring to the state Department of Education's program for districts that have to routinely draw from their reserves to meet their expenses. The North Little Rock district was released from the fiscal-distress program in 2012.
The unanticipated reduction in operating revenue comes at a time when the 9,000-student district was already trying to shave operating expenses and put those savings toward its $265.5 million capital-improvement program.
The district is reducing the number of its campuses from 21 to 13, nearly all of which will be rebuilt or extensively renovated.
On top of that, the district is also anticipating the loss of $7,642,338 per year in state desegregation aid. That special state funding will cease to be paid after the 2017-18 school year.
Board member Darrell Montgomery asked whether the Pulaski County Quorum Court could allocate funds from the county's budget to help the district offset the revenue loss caused by the error.
"We could easily be in fiscal distress if we don't approach this carefully and get assistance from all the entities," Montgomery said.
Pulaski County Attorney Karla Burnett said it is up to the district to come up with the money but that an agreement among the affected parties could make that "less painful."
Board member Scott Miller asked about the possibility of making a claim to the county's risk-management program since the problem is the result of an error made by the assessor's office.
Burnett said the county is immune from lawsuits over errors but even if it permitted the district to make a claim, the cap on the payment would be $100,000.
Jones, the attorney, said his reading of the risk-management handbook said claims for errors and omissions were payable up to $250,000.
Beardsley told the board that as a result of the error, the assessed value of property in the district was overstated, which resulted in less state aid to the district for its building program.
He suggested that if the building aid, known as the Partnership Program Funding, is recalculated based on the district's lower property assessment the resulting increase in state aid could be in the area of $800,000 or more.
"It would be pretty close to washing out the error," Beardsley said.
Miller asked Beardsley whether the North Little Rock School District could have prevented or caught the assessment error.
Beardsley said there was no way that the district's accounting office could have detected it. The district receives a report on the total assessment each year, broken down by personal and real property. The assessment is not reported parcel by parcel.
The Pulaski County assessor's office notified leaders of the North Little Rock and Pulaski County Special school districts that certain properties were mistakenly assessed in the North Little Rock School District instead of the Pulaski County Special district. Those errors date back to property annexations that occurred in 2007 and 2008, Ward said Thursday.
North Little Rock annexed property in those two years, the assessor's office correctly updated records to assign the property to the city but also tagged it, incorrectly, for the North Little Rock School District.
Property annexed by the city is not automatically annexed by the school district, and city and school district boundaries do not always coincide.
As a result of the error, some tax revenue belonging to the Pulaski County Special District has been going to the North Little Rock district. Additionally, owners of about 400 homes and businesses in the affected area have been paying the North Little Rock School District's property tax rate.
Information for this story was contributed by Emily Walkenhorst of the Arkansas Democrat-Gazette.
A section on 05/16/2014